Blog Archives

Profiting From Trading Stocks Of The S&P 500 Healthcare Sector (iM-Top5(XLV)Select)

  • This 5-stock trading strategy with the Healthcare Sector stocks of the S&P 500 produces much higher returns than the Healthcare Select Sector SPDR Fund (XLV).
  • The universe from which stocks are selected holds point-in-time, the S&P 500 healthcare stocks of FactSet’s Reverse Business Industry Classification System.
  • The model ranks the stocks of this custom universe with the Portfolio123 “Greenblatt” ranking system and selects periodically the highest ranked stocks which also satisfy stipulated industry and yield requirements.
  • From 1/2/2009 to 9/28/2020 this strategy would have produced an annualized return (CAGR) of 23.6%, significantly more than the 13.8% CAGR of XLV over this period.

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Profiting From Trading Stocks Of The S&P 500 Consumer Staples Sector (iM-Top5(XLP)Select)

  • This 5-stock trading strategy with the Consumer Staples Sector stocks of the S&P 500 produces much higher returns than Consumer Staples Select Sector SPDR Fund (XLP).
  • The universe from which stocks are selected holds point-in-time, the S&P 500 consumer non-cyclical stocks of FactSet’s Reverse Business Industry Classification System.
  • The model ranks the stocks of this custom universe with a modified “Greenblatt” ranking system and selects periodically the highest ranked stocks which also satisfy stipulated yield requirements.
  • From 1/2/2009 to 9/23/2020 this strategy would have produced an annualized return (CAGR) of 25.3%, significantly more than the 11.4% CAGR of XLP over this period.

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Profiting from Trading Stocks of the Technology Select Sector SPDR Fund (XLK) — iM-Top5(XLK)Select

  • This trading strategy with five stocks from those of ETF (XLK), mainly with a dividend yield greater than that of the S&P 500 index, produces much higher returns than XLK.
  • The universe from which stocks are selected holds point-in-time, the S&P 500 technology stocks of FactSet’s Reverse Business Industry Classification System and some electronic payments industry stocks, similar to XLK.
  • The model ranks the stocks of this custom universe with the Portfolio 123 “Greenblatt” ranking system and selects periodically the highest ranked stocks which also satisfy the stipulated yield requirement.
  • From 1/2/2009 to 9/8/2020 this strategy would have produced an annualized return (CAGR) of 31.8%, significantly more than the 20.1% CAGR of XLK over this period.

The analysis was performed on the on-line portfolio simulation platform Portfolio 123.
Read more >

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Profiting from the Consensus Stock Holdings of Ten Large Hedge Funds (iM-10LargeHedgeFundSelect)

  • This is a copycat trading strategy based on the quarterly 13F filings of 10 large hedge funds with assets under management (AUM) greater than $3.5-Billion.
  • The algorithm looks at the top 20 largest holdings from each of the 10 filers and then picks the 15 most frequently held stocks among all of the filers.
  • The model selects 12 of the 15 consensus picks from this hedge fund group with a ranking system based on quality.
  • Changes in the holdings occur only every three months, about 45 days after the end of a quarter when 13F filings become public information, February, May, August, and November.
  • From Feb-2008 to Aug-2020 this strategy would have produced an annualized return (CAGR) of 27.6%, significantly more than the 10.1% CAGR of the S&P 500 ETF (SPY) over this period.

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A Dividend Growth Strategy for Perennial Income

  • A simulation of this strategy with annual withdrawal rates of up to 10% still showed long-term growth which exceeded that of buy-and-hold the S&P 500 ETF (SPY).
  • The backtests use the FactSet stock database and FactSet’s Revere Business Industry Classifications System (RBICS).
  • The model holds equal-weight 10 stocks of the Russell 1000 index which are ranked with a simple ranking system to identify shares of the highest “quality” companies.
  • The strategy provides a high dividend yield because a minimum yield excess (depending on RBICS sector type) over the yield of SPY is a critirium for stock selection.
  • From Jan-2000 to Jun-2020 this strategy without withdrawals would have produced an annualized return (CAGR) of 21.5%, much more than the 5.6% CAGR obtained from SPY over the same period.

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Covid-19 Recession — No Sign of a Recovery: The iM-Weekly Unemployment Monitor

  • A truer picture of the employment situation is extracted from the Unemployment Insurance Weekly Claims (UIWC) report.
  • Persons receiving some form of unemployment benefit account for 18.6% of the labor force and not 13.3% – the official unemployment rate. 
  • Monitoring of the weekly insured unemployed can provide early indication of recovery from the Covid-19 crisis.
  • No meaningful economic recovery is identified from the current UIWC report.

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Profiting from the Consensus Stock Holdings of Five Hedge Funds (iM-5HedgeFundSelect)

  • This is a copycat trading strategy based on the quarterly 13F filings of five hedge funds.
  • The model holds the top 20 consensus picks from a group of five hedge funds.
  • Changes in the holdings occur only every three months when the end-of-the-month 13F filings becomes public information.
  • From Jan-2007 to May-2020 this strategy would have produced an annualized return (CAGR) of 27.1%, much more than the 7.8% CAGR of the S&P 500 ETF (SPY).

Rational for a Copycat Strategy

Research from Barclay and Novus published in October 2019 found that a stock selection copycat strategy that combines conviction and consensus of fund managers that have longer-term views outperformed the S&P 500 by 3.80% on average annually from Q1 2004 to Q2 2019.

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Robust Recession Forecasting With The FED’s Brave-Butters-Kelley Indexes ─ Update February 4, 2020

  • The new Federal Reserve Bank of Chicago Brave-Butters-Kelley Indexes ( BBK ) provide useful input for recession forecasting.
  • In the past, low estimates of BBK GDP growth related to the respective recessions, this allow the extraction of a recession warning signal from this growth series.
  • We combine two BBK indexes with the Conference Board LEI and iMarketSignals’ Business Cycle Index BCIg to derive our Long Leading Index (iM-LLI) for the US economy.
  • Currently neither index signals a recession warning.

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Robust Recession Forecasting With Our New Long Leading Index For The US Economy

  • The new Federal Reserve Bank of Chicago Brave-Butters-Kelley Indexes (BBK) provide useful input for recession forecasting.
  • We combine two BBK indexes with the Conference Board LEI and our Business Cycle Index BCIg to derive iMarketSignals’ new Long Leading Index (iM-LLI) for the US economy.
  • Our analysis shows that the iM-LLI would have provided an average warning signal about eight months before the start of recessions, as observed for the last seven recessions since 1967.
  • We are replacing the iM-Composite Index (COMP) with the new iM-LLI.
  • Currently this Leading Index is not yet warning of an oncoming recession.

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Recession Forecasting With the Federal Reserve Bank of Chicago’s Newly Released Brave-Butters-Kelley Indexes

  • From November 2019 onward, the Federal Reserve Bank of Chicago is releasing new measures of monthly real GDP growth and its components, the Brave-Butters-Kelley Indexes.
  • The data release is for four indicators constructed from a panel of 500 monthly macroeconomic time series and quarterly real gross domestic product growth.
  • Our analysis shows that apart from the Leading Index, the other three indicators would have been extremely accurate identifying recessions were it not for the publication time-lag.
  • This time-lag makes, on average, these indicators about two month late to signal the start and end of recessions in real-time, as observed for the last seven recessions since 1967.
  • Currently none of the Brave-Butters-Kelley Index models are warning of a recession.

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